Continued value growth in Nutrition

Transcription

1 Stephan Tanda, Member of the Managing Board Continued value growth in Nutrition DSM Capital Markets Day 2013 Page

2 Overview Delivering on strategy Update on integration & synergies acquisitions Strategy forward Page

3 Thi s im Nutrition: CSD aspirations in 2010 Source: DSM CMD 2010

4 Thi s im The existing strategy has served us well A strong Product Portfolio DSM Portfolio leveraged across the value chain addressing attractive markets Regional - Global Organic growth: GDP +2% and EBITDA margin 20-23%

5 Thi s im Strong sales growth Sales ( m) per half year On average 10% CAGR sales growth since 2010, driven by volumes (5%) and M&A (5%) 2400 Organic growth of 3% CAGR on average since Animal & Human Nutrition grow at similar rates with Animal Nutrition growing faster at the beginning of the period and Human Nutrition growing faster more recently 1600 Stable market shares in Animal Nutrition and Human Nutrition 1200 Growth rates always fluctuate somewhat

6 Current market conditions Animal Nutrition & Health Poultry and aquaculture protein markets continue to be impacted by diseases in several high growth economies Recovery in animal protein markets remain fragile creating some price pressure, especially in Vitamin E DSM sticks to its value over volume strategy Decreasing agricultural commodity prices are supporting a steady but slow recovery in animal protein production Human Nutrition & Health Favorable conditions for Infant Nutrition and Food Specialties bio Ingredients Food & Beverage customers face soft demand, particularly in Western markets Demand for fish oil based Omega 3 Dietary Supplements is being impacted by sharp price increases at retail, as the entire value chain has pushed through higher fish crude oil costs Fish oil prices expected to soften and value chain to rebalance Dietary supplements overall expected to resume growth Foreign Exchange The US$, the Brazilian Real, Japanese Yen and several other HGE currencies, to which DSM has an increased exposure, have weakened recently versus the Euro Expectations for remainder of 2013 Full year organic growth estimated around 3%, moving to GDP+2% in Q4 Page

7 Thi s im Healthy EBITDA growth with high margins Since the start of the new CSD strategy period, EBITDA margins have remained stable at the high end of the 20%-23% target range Healthy EBITDA growth driven by: organic growth M&A Profit Improvement Programs All together more than offsetting the negative FX impact from the stronger Swiss franc (about 130m) Nutrition EBITDA now ~70% of DSM s Group Total EBITDA margins for H2 expected to be well within the 20-23% range EBITDA ( m) per half year

8 Fundamental growth drivers fully intact Human Nutrition Animal Nutrition Growing population, urbanization and rising standards of living drive increased consumption of fish, meat, milk & eggs Public concern about quality, safety and sustainability Need for safe and efficient animal & marine protein production Growing population, urbanization and rising standards of living drive increased consumption of processed foods, requiring specialty food ingredients Desire for health, wellness, longevity & healthy ageing drive demand for Infant Nutrition: Growth in HGE, Quality & traceability Dietary Supplements: increasing health awareness Healthy Food & Beverage choices for consumers High market attractiveness supported by strong macro trends Page

9 Broadest portfolio with extended value chain Portfolio of active ingredients broadened: Polyunsaturated fatty acids (PUFAs): Omega-3 (DHA, EPA), Omega-6 (ARA) Natural carotenoids Cultures, enzymes Tortuga trace minerals Global network further expanded: Animal Nutrition: China, Colombia, Ecuador, Indonesia, India, Italy, Philippines, Romania, Russia, South Korea Expanded animal market reach with Tortuga (Brazil) Human Nutrition: Premix network more than doubled with acquisition of Fortitech and Unitech (New Zealand) Value chain further extended downstream with customer-driven solutions and segmentspecific finished-product solutions, incl. B2C Page

10 Global network for local markets till 2010 new since 2010 Page 70

11 The innovation partner in Human Nutrition Specialty food ingredients: 42bn vitamins enzymes antioxidants lipids carotenoids colors hydrocolloids yeasts cultures minerals probiotics Macro food ingredients: dairy > 710bn fruits cereals proteins meat/fish oils spices flour salt sugar Food & Bev. manufacturers: 1,750bn Dietary supplements companies: 34bn Retail brands: 2,295bn Store brands: 315bn Food service: ~ 2,500bn Consumers: > 5,100bn (excl. unprocessed foods)

12 Current launches in Human Nutrition Infant Nutrition Dietary Supplements New FloraGLO Lutein Delivery Form New Lutein (for eye health) 1% SD/S form enables inclusion in new Infant Nutrition products in Asia, leveraging DSM s network New Forms enable Gummies with Life s DHA, MEG-3, Science and innovation collaboration fuel new launches with vitamins, lutein, zeaxanthin a/o with Bayer, Church & Dwight, Bausch & Lomb, Alcon Savory flavors Food & Beverages Maxagusto : unmatched taste intensity and flavor that is truly evocative of homemade foods Customized to local food habits. Helping customers to move away from basic flavoring and get the mouth watering taste, whether you are in India or Indiana Whitewave Horizon: Organic, Back to School, Chocolate Milk with Life s DHA in North America Life s DHA in single serve containers. First ever launch of DHA fortified chocolate milk.

13 Thi s im Innovation pipeline in Human Nutrition: Oatwell Oatwell, with proven health benefits From agriculture to consumer Proven to lower blood cholesterol Helps to reduce the risk of CVD

14 Thi s im Innovation pipeline in Human Nutrition: Purifine Game changer for profitable oilseed crushing & refining Enzymatic degumming of vegetable oils (soy, canola, sunflower) during crushing Increased Yields, Lower energy usage, Avoidance of harsh chemicals For soybeans alone this reflects > 1bn in additional customer value Leveraging Verenium acquisition and DSM Biotech capability and global footprint

15 Thi s im Innovation pipeline in Human Nutrition: Stevia Steviol Glycocides: sustainable, fermentative alternative to plant-based Stevia (sweetener) Market potential for high intensity sweeteners is ~ 3bn DSM s value proposition: Combine biotech and food know-how resulting in cleaner taste, cost competitive, more sustainable Steviol glycocides (IP-protected)

16 Thi s im Innovations in Personal Care: Alpaflor Edelweiss Discover a new level of protection for the ultimate skin sensation Unique new variety of Edelweiss, Preserves skin s natural balance Strong anti-oxidative & protective properties

17 The innovation partner in Animal Nutrition Specialty Feed Additives and Premix: amino acids > 10bn vitamins enzymes antioxidants lipids carotenoids minerals eubiotics probiotics yeasts Compound Feed 198bn Processors Retail/ Food Service Medicated Feed Additives: > 10bn antibiotic growth promoters vaccines therapeutics Additives for pasture raised animals Feed ingredients Soy, Corn, etc. ~ 140bn > 1,200bn > 4,000bn

18 Current launches in Animal Nutrition CRINA Poultry Plus a combination of two proven products essential oil components with the most effective organic acid for better gut health HyD for Swine Increases the profitability of sow herds. Better bone strength leads to higher selection rates of gilts and higher reproductive performance of sows ROVIMIX MaxiChick a unique poultry feed solution to improve egg fertility, embryo survival and chick viability ANH in the App store E-enabling customers and our sales force to be at the fore front of animal nutrition science Page78

19 Innovation pipeline in Animal Nutrition: CleanCow Feed 20kg/day Livestock are responsible for methane emission, a GHG that causes global warming DSM is working on CleanCow, a feed additive(s) solution: 1. to reduce methane by 25-30% in vivo 2. with the potential for better performance (increased milk yield, increased body weight gain, etc.) CleanCow : reducing methane emissions from cattle

20 Innovation pipeline inanimal Nutrition: The fittest phytase third generation phytase evolved to give you more Increased production with less environmental impact Extracts more phosphorus from plant phytate Replaces more inorganic phosphorus in animal diets Gives faster growth and optimized feed cost savings and even more reduction in phosphorus excretion

21 Nutrition: Delivering on the strategy Broadest range of active nutritional ingredients Fully leveraged across the value chain Global premix network, moving into solutions Innovation partner of choice for the food, feed & personal care industries Strong sales growth, with steady EBITDA growth and stable margins Successful, value creating acquisitions

22 Overview Delivering on strategy Update on integration & synergies acquisitions Strategy forward Page

23 Thi s im Acquisitions creating attractive shareholder value Acquisition EV NPV Martek 730m 1.4bn ONC 420m 730m Fortitech 495m 855m Tortuga 465m 843m M&A adding > 1.2bn in sales and > 250m in EBITDA Attractive growth expectations of > 10%

24 Thi s im Martek: fully integrated with ONC Reminder What we have achieved Martek is fully integrated with significant synergies realized Achieve leadership in nutritional lipids and infant nutrition Expand PUFAs for Infant Nutrition outside the US market Expand Martek s PUFAs in noninfant applications such as food & beverages, dietary supplements Financials: Double-digit sales growth Stable margins Nutritional Lipids growth platform created, together with ONC Successful penetration of Infant Nutrition markets outside the US, launches in all regions, sales outside the US have increased substantially, with highest growth in Asia Successful growth of PUFAs in Dietary Supplement applications Huge growth potential in food & beverage end-markets Martek products have continued to deliver double-digit organic growth and ~30% EBITDA margin

25 Thi s im Ocean Nutrition Canada: fast integration Reminder What we have achieved Nutritional Lipids growth platform created together with Martek Strengthen DSM in North American dietary supplements market Leverage DSM s global network to grow Omega-3 for dietary supplements, food & beverages outside the US Financials: Double-digit sales growth Continued high margins Ocean Nutrition manufacturing and R&D fully integrated Global HNH Sales force trained and executing well Leveraging our increased access to NA retailers Mitigation of some price volatility linked to crude fish oil Ocean Nutrition Canada has delivered sales in line with acquisition business case and EBITDA close to business case, despite significantly higher fish oil prices

26 World leader in Nutritional Lipids Exciting synergies achieved: Combination of Martek and ONC (algea-based and fish-oil based products) created a strong leader in nutritional lipids and has strong synergies with the existing DSM activities as well Strongest growth for PUFAs in Asian Infant Nutrition double digit North American dietary supplement market mature, with growth potential intact Latin America growing at double-digit pace albeit from a low base Europe with single-digit growth in Infant and Dietary Supplements *including i-health

27 Fortitech: high customer centricity Reminder Adds a strong position in customized food ingredient blends Expands DSM s value chain presence offering complete solutions to customers globally Financials: Double-digit sales growth Significant cost synergies plus capex avoidence What we have achieved Integration well underway with new Human Nutrition & Health Premix structure preserving the Fortitech operational model. Focus is on high service and customized, local solutions. Significant cost and ingredient supply synergies confirmed and being realized in all regions Capex avoidance fully realized in North America and Latin America with DSM site consolidations and expansions at the Fortitech sites Market share fully maintained with favorable customer reception in all regions Forward integration projects, offering complete / turnkey solutions are accelerating, increasing DSM share of wallet Double-digit sales growth and EBITDA margin enhancement well in line with business case

28 Cultures and Enzymes business from Cargill Reminder Cultures market is a very attractive & growing market Even stronger position with a broad offering to the Achieve global dairy industry Leverage of core competences in biotechnology in enzymes & cultures High synergy potential What we have achieved The Cargill and DSM Cultures businesses have been fully merged into one organizational unit Successful offering of new value proposition in Dairy Enzymes & Cultures to leading global dairy players Integration of portfolio including brand and product rationalization Strongly improved profits, achieved by capturing significant synergies

29 Tortuga: step-up in Latin America Reminder Fundamentally strengthen DSM in Latin America with direct access to 35,000 Brazilian farmers Strengthen DSM s ruminant position globally Create Organic Trace Mineral platform Financials: Deliver strong Growth and Earnings What we have achieved Tortuga integration program on track and fully completed in 2014, with impact already visible in business results Product registrations progressing for expansion of the ruminant position in Latin America Ultimately creating additional value for ruminant solutions through Vitamin & Carotenoid supplementation Tortuga mineral program expansion into monogastric underway in the region Sales and earnings fully on track to deliver the business case

30 Integration process on track Integrate acquisitions... Martek (NA) ONC (NA) Microbia (NA) Joint category organization Cargill s Cultures & Enzymes Fortitech (global) Unitech (NZ) Tortuga (LATAM) Combined set-up & Proposition: Dairy Enzymes & Cultures Build global DSM HNH Fortitech Premix business and organization Create LATAM ANH Powerhouse for all species

31 Proven track-record in M&A DSM has added successful value creating acquisitions to its portfolio: integration & realization of synergies on track Completed 10 transactions since the start of the new CSD period Significant in-house capability to execute deals and highly experienced in integration DSM s Nutrition cluster has evolved significantly following the acquisitions: Increased customer relevance through broader portfolio Improved customer access and regional footprint New skills and capabilities added to DSM s Nutrition cluster Resulting in multiple new growth ideas

32 Building a China based hydrocolloids platform Texture market presents an attractive growth opportunity for DSM, leveraging our world class biotechnology capabilities and unique, global customer access Focus is on ~ 6 billion market of hydrocolloids ingredients. Food hydrocolloids provide important functionalities such as gelling, thickening and stabilization in foods First project 2011: acquisition of China based Gellan gum producer proved very successful, albeit small Now adding Andre Pectin, the only successful new global pectin entrant over the past 20 years. Annual sales around 30 million Option rights to raise stake from 29% to majority, including 100%, over time Global unit managed from China

33 Overview Delivering on strategy Update on integration & synergies acquisitions Strategy forward Page

34 Changing business environment More & more Markets Demand growth is shifting further to High Growth Economies Locally specific consumer preferences, market and channel structures Customers More demanding, requiring deeper insights and customized solutions Have more choice: supplier relevance and differentiation wins Value Chain Unique presence across the value chain, driving: Integrated profitability Market focused Innovation Quality assurance Locally tailored solutions Eco+, sustainable offering Industry developing into two sets of players, with totally different skill sets and assets: product-centric "producers" customer-centric "solution providers" DSM is the only player with leading positions in both! Page

35 Unique business model with global & local capabilities FROM Actives Forms Premix TO Active Ingredients GLOBAL PRODUCER Forms + Solutions Access & insights LOCAL SOLUTION PROVIDER Broad, global Portfolio of Actives: high quality, costcompetitive to maintain leading market position Maximum Differentiation through industry & segment specific Formulations offering stability, shelf life, heat resistance, solubility, bio-availability, physical properties Premixes: from channelto- market to customerdriven solutions. Further downstream integration to segmentspecific finished product solutions Proprietary access to local customers (B2B) and end-consumers (incl B2F) Translating customer insight into unique nutritional solution offers >100 active ingredients: Vitamins A-Z, Carotenoids, Yeasts, Savory Flavors, Enzymes, Cultures, Lipids / Omega, Hydrocolloids, Antioxidants, Eubiotics, Organic trace minerals, Personal Care ingredients Page

36 Strategy implementation Drive continued organic growth: Macro trends continue Unique business model Increased focus on HGEs (incl. acquisitions) Additional regional application & research centers Organization development Selected investments in existing portfolio: Product forms Vitamin B6 in China Omega 3 Natural Carotenoids Cultures & Enzymes Savory flavors Assessing further M&A to strengthen our position Global product portfolio Local solutions and customer/channel access Nutrition Targets confirmed: Organic growth GDP +2% EBITDA margin range 20-23% Page

37 Contact: DSM Investor Relations P.O. Box 6500, 6401 JH Heerlen, The Netherlands (+31) internet: visiting address: Het Overloon 1, Heerlen, The Netherlands Page

38 DISCLAIMER This document may contain forward-looking statements with respect to DSM's future(financial) performance and position. Such statements are based on current expectations, estimates and projections of DSM and information currently available to the company. Examples of forward-looking statements include statements made or implied about the company s strategy, estimates of sales growth, financial results, cost savings and future developments in its existing business as well as the impact of future acquisitions, and the company s financial position. These statements can be management estimates based on information provided by specialized agencies or advisors. DSM cautions readers that such statements involve certain risks and uncertainties that are difficult to predict and therefore it should be understood that many factors can cause the company's actual performance and position to differ materially from these statements. These factors include, but are not limited to, macro-economic, market and business trends and conditions, (low-cost) competition, legal claims, the ability to protect intellectual property, changes in legislation, changes in exchange and interest rates, changes in tax rates, pension costs, raw material and energy prices, employee costs, the implementation of the company s strategy, the company s ability to identify and complete acquisitions and to successfully integrate acquired companies, the company s ability to realize planned disposals, savings, restructuring or benefits, the company s ability to identify, develop and successfully commercialize new products, markets or technologies, economic and/or political changes and other developments in countries and markets in which DSM operates. As a result, DSM s actual future performance, position and/or financial results may differ materially from the plans, goals and expectations set forth in such forward-looking statements. DSM has no obligation to update the statements contained in this document, unless required by law. The English language version of this document is leading. A more comprehensive discussion of the risk factors affecting DSM s business can be found in the company s latest Annual Report, a copy of which can be found on the company's corporate website, Page